The views expressed in the articles are solely those of the author(s) and do not represent the organization to which the author(s) belong or the Research Institute of Economy, Trade and Industry. However, the amount of electricity traded through the JEPX system is only 0.6% of the total amount of wholesale electricity in the 2010 financial year (Cabinet Office, 2012). The second contribution of this study is to estimate this implicit spread cost for weekly transactions in JEPX and reveal that it is about 15% of the intrinsic value of electrical energy.
Third, the cross-sectional patterns of estimated costs are quite parallel to the patterns of systemic price and trading volume. Using trading volume as a measure of liquidity would affect the pattern of illiquidity in terms of the implicit measure of spread costs. The system combines the published demand and supply schedules for each contract into demand and supply in the entire market, and their intersection determines the system price and the traded amount of electricity for delivery in the corresponding half-hourly interval of the day.
The basic unit of electric power in JEPX is 1,000 kilowatt-hours per hour (kWh/h) or 1 megawatt-hour per hour (MWh/h), and the smallest monetary unit is 1/100 of a Japanese yen per kilowatt-hour (JPY/kWh). The title of each panel shows the pair on the day of the closing session and the day of delivery. A simple measure of the dispersion is given by Roll (1984) based on the first-order serial covariance of transaction returns.
It captures an absolute average rate of price change relative to the monetary value of a traded volume.
A comparison with emerging financial markets
This pattern is consistent with the different timing of the two peaks of intraday plots of prices and volumes, as discussed in section 3.2, and more complex than the U-shaped curve of inverse monetary volume as shown. For example, Monday looks very liquid as inverse monetary volume hits a low, but the price impact measure recognizes it as the most liquid period. This is most evident for weekday difference costs, as their plots are quite parallel to those of system prices and raw volumes in Figure 1, so they are inverted images of inverse monetary volume.
This possibility suggests the presence of a potential advantage for electricity producers to enter JEPX for a profitable transaction of electricity. Recall that traded volume drifts upward during this period, as suggested by the middle panels of Figure 7. In contrast, the spread cost measures in intervals higher than those in the 4:30-5:00 interval are constant, and both are not stabilized either not lowered in the later trial period.
Because raw traded volume has increased over time, the last point suggests that traded volume may not impact implied spread costs.
Results of Estimating (11)
Results of Estimating (12)
Results of Estimating (13)
Let me see if the liquidity condition in the JEPX changed before and after the big earthquake. They suggest that the full sample results in the fourth column are mainly driven by characteristics of data in the pre-earthquake period. The results in S4 indicate the restoration of the trade-off between the illiquidity risk and returns, as the estimate of the price impact coefficient becomes positive.
Although a traded volume can be informative about the state of liquidity in the market, some economic measures can show different pictures. Second, the regulatory authority should pay more attention to the implicit cost of spread on the exchange, because a high trading cost may be an implicit entry barrier for potential OTC energy producers. Third, measuring the cost of the implied spread requires a caution about the market clearing mechanism.
Fourth, JEPX returns may reflect the price impact aspect of illiquidity more than the cost-of-spread aspect, so JEPX executives view the former as a more risk-averse factor. This is surprising because the magnitude of the cost of the spread is comparable to the more illiquid emerging markets in the 1990s. One way to reconcile these results is to assume that the implied cost of the spread is related to the entry decision of potential energy producers. , while the measure of price impact is related to the concerns of current operators in JEPX.
11Negative correlation, in line with the trade-off between risk and return, is puzzling even in a market with frictions (Merton, 1987) and is called the idiosyncratic volatility puzzle in the field of empirical finance. It is interesting to observe a similar puzzle in JEPX, which is not a standard financial market. Turning to the more indirect but multiple justifications for the spread cost in the call auction mechanism as presented in Section 1, the spread cost may additionally include (i) the order processing costs of traders who choose to remain permanently in the market, such as e.g. clearing fees and apportionment of fixed costs for computers, telephones and high-speed servers to individual trades, and (ii) the inventory costs of such traders in preparation for the accidental imbalance of a large order (for these aspects, see Hasbrouck, 2007 and references therein). costs of propagation).
Management and the regular body of JEPX should continuously improve these aspects of spacing costs. Finally, it is difficult to deal with GES in JEPX: they are almost indispensable for the newly established exchange to ensure a minimum amount of liquidity in the market for smooth operation and to ensure a stable transmission of electricity. In addition to disincentivizing GES to improve JEPX, its behavior as an informationally dominant market participant may hinder the reduction of JEPX's implicit spread costs.
Recall that a shift of the entire supply or demand curve by the insider is the main culprit, and therefore a wedge for identifying, the implicit spread cost in Brünner's model. The connection between an analysis of the market microstructure in this study and a political economic analysis of electricity industry regulation could provide a compelling argument about how these regionally monopolistic energy producers can be involved in the advancement of an energy exchange. The third meeting of the second working group on energy system and regulatory reforms.
9th meeting of the Advisory Committee for Power System Reform (Denryoku System Kaikaku Senmon Iinkai, in Japanese).